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Is Tesla Upsetting the Franchise Status Quo?


Tesla-Owned DealershipAs a start-up company and the first solely electric vehicle [EV] manufacturer, Tesla Motors has all rights to be seen as a bit different, so why would the selling process be the same as all others automobile manufacturers? To that end, Tesla Motors as done exactly what Apple has done, to manufacture and sell their own products, without getting involved in franchises.

With no franchises to work through, Tesla can control the marketing, pricing, and sales tactics. Additionally, without commissioned salespeople, Tesla vehicles are sold with no pressure. Since there are few models, the basic premise of the Tesla associate is to explain how the Tesla product is different from gasoline-powered and hybrid vehicles.

In 48 states, there are laws in place that keep automakers from owning franchises, but Tesla has opened a number of dealers across the US and Canada. Every single one of them is owned and operated by Tesla Motors. The way the law is written, though, makes the case that manufacturers should haven’t an unfair advantage over other franchises. The loophole is, there are no other EV dealerships for Tesla to compete with.

Elon Musk, Tesla Motors CEO, summed up in his blog the problem with trying to sell an EV in a franchise, “Existing franchise dealers have a fundamental conflict of interest between selling gasoline cars, which constitute the vast majority of their business, and selling the new technology of electric cars. It is impossible for them to explain the advantages of going electric without simultaneously undermining their traditional business.”

“This would leave the electric car without a fair opportunity to make its case to an unfamiliar public,” Musk goes on to say. Dealership franchise associations see it differently, and have even threatened legal action against Tesla Motors. This could bring pressure to bear on Tesla, but the courts will have the final say if any of these threats are seriously followed through.

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